From formulasearchengine
Jump to navigation Jump to search

Even now, several years after the big breakdown of the financial industry, lending is close to a standstill.

For businesses, especially small businesses, the atmosphere is even more stagnant. Lenders are being extremely aggressive in their selection.
It isn't hard to understand why when looking back at the large numbers of bad loans that caused much of the catastrophe, but it makes getting needed cash flow that small businesses depend upon to stay afloat more difficult. Because of the tighter restrictions, small business owners are turning to credit cards more than ever to find the credit line they used to look to their banker for.

Record High Rates for Business Credit Lending
The SBA Office of Advocacy issued a report showing how the lending atmosphere has affected small business owners. That report showed how small businesses took the largest hit following the lending crisis, and that lending tightened appreciably following 2008.

Part of the reason those banks that offered small business loans turned away from further lending, or closed altogether is that many of the banks that provided help for small businesses did not come under the TARP protection that bailed out the bigger banks.

While business credit cards are easier to obtain than a typical small business bank loan, the interest rates on them now reflect the difficulties the banks are struggling with. Small businesses are risky to start with, but the fact that so many business owners are looking to credit cards has increased the amount of risk the banks that sponsor them are taking on.
Even a business owner with reasonably good credit may be facing a standard interest rate of as much as 15%. If a small business owner has to rely on personal credit ratings to obtain a line of credit and they have a poor credit score, that rate can soar to as much as 23.4%.

What makes credit interest rates so high? The higher the risk the more interest in needed to cover potential losses.
Watch Out for that Hike
Beware of deals on business credit cards that offer 0% financing, or low interest rates. While they can be a good deal, it is important to read the terms of the card and understand them completely. Many of those attractive rates disappear after a short introductory period, and the rates skyrocket to the top of the charts compared with the average business credit card.

When considering one of the appealing low interest/no interest offers, weigh the pros and cons. If you can pay back the amount you use on a business credit card on a monthly basis, those attractive rates aren't helping you any more than a more traditional business credit card.
Both would accumulate 0% interest when paid off within the initial cycle.
However, if extra cash is needed for larger purchases to get a business on track, but the total amount can be paid off during the full run of the low interest period those attractive rates can pay off. A business owner can save a lot of money in interest while getting the needed supplies or equipment to get started.

Paying off a credit card debt for longer than the low interest rate period will get expensive, however. If a longer term credit period is necessary, it may be smarter to look at a flat rate card that has a slightly higher rate that will stay consistent.
Obtaining a Business Credit Card Account
Build and create a credit history and identity for your business. Keep your business credit score clean. Whenever possible a business owner should get credit of any type in the company's name, not their own. This is an insurance against losing personal credit if the business fails, but it is even more important than that.

When using personal credit to obtain a business credit card, funding may not be available when you need to make purchases necessary for providing things for the family in an emergency.
Get an EIN from the IRS. The Internal Revenue Service offers Employer Identification Numbers on their website. It is a free service and takes just minutes to complete. This number will take the place of your personal social security number when filling out applications for business credit cards and even loans and other forms of lending.

Have a mailing address or P.O. Box dedicated to your business. Have the address and your business phone number listed in the 411 Assistance and directory listings. This keeps your personal residence separate from the business.
Make sure your business name is consistent. You may be surprised to find you have listed the name of your company differently on various forms, UGG Boots Outlet or in the directories. Make sure to look online at Cheap UGG Sale how your company appears in search engine listings as well. It is not uncommon for new business owners to make the mistake of labeling their business as "ABC Services" on one source and on another, having it show up as "ABC Services, Inc." or some other variation of the same name.

Address listings should always appear the same as well. If your business address is 123 Broad Street, unit 1 it should appear that way at all times. Never substitute "suite" or "#" for the "unit" sign, or vice versa.
Obtain a DUNS number from Dun & Bradstreet. You can get this number on their website for free. The free service can take several weeks, or even months, to complete before you receive the number. Be prepared and apply for the DUNS number in advance of any credit applications.

If you find yourself in a pinch, and need the number immediately, you can pay a fee for same day service.
UGG Boots Sale Protect Your Business Identity
Almost everyone has heard of identity theft. Business owners have to be aware that even a business identity can be at risk. A good way to protect your business identity is to make use of a credit score management system. These services are offered by all of the major business credit monitors such as Dun & Bradstreet, Equifax and Experian.